Small Cap Stocks

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Small Cap Stocks

Small Cap Stocks With Good Upside Potential

Small caps are usually available at very low or reasonable valuations. But, you can't just pick any small-cap stock, as the risk of investing in such stocks is usually higher than that of blue-chip stocks.

With that in mind, there are two small caps on the London Stock Exchange that come with good upside potential. The first one is Ramsdens (RFX) and the other is Filtronic (FTC).

Ramsdens

The Ramsdens has a market cap of 113 million only and is involved in FX exchange, pawnbroking, and buying/selling of jewellery. The Ramsdens has its presence both online and offline through its 169 branches.

The increase in gold prices has also pushed the precious metals segment of Ramsdens. In fact, the gross profit of Ramsdens increased 50% y/y just because of the higher gold prices.

And for the full year, Ramsdens is expected to make a profit of around 15.4 million before taxes. If this target is achieved, that would be an increase of almost 35%.

In the past year, the Ramsdens stock price gained 76% but what's impressive is that the valuation is still very reasonable. The forward P/E ratio of Ramsdens is also only 9.8.

Filtronic

Filtronic (FTC) is also a good pick from the small-cap stocks category. They have a market cap of 287 million and are involved in the manufacturing of products for space, defense, and aerospace.

Their products are also used in telecom infrastructure, which is a key reason why we have included Filtronic in our list of stocks.

In the last 2 years, Filtronic's stock has gained an upside of almost 800%. Most of it was due to Filtronic's partnership with SpaceX.

As per the deal, Filtronic will now be making and supplying different components for the Starlink satellites. The proposed deal with SpaceX is worth 47 million.

But a key risk for Filtronic is the fact that around 83% of the revenue during FY2025 came from SpaceX. So, Filtronic will need to diversify its income sources to mitigate that risk.

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